Rio is the ‘Real’ Deal as Real Declines

Property in Rio de Janeiro, Brazil, is beginning to look very attractive for foreign investors as prices continue their swift decline, fuelled by a sharp devaluation of the Brazilian Real.

Rio de Janeiro has become one of the most livable cities in the world. Image by kaysha - flickr.com

Rio’s real estate sector has experienced a roller coaster ride in recent years, with property prices soaring sky high at one stage due to a growing demand from Brazil’s middle class amid the country’s impressively strong economic performance.

Thanks to increased confidence and the strength of the Real, banks in Brazil issued record numbers of mortgages, causing Rio to rapidly transform into one of the world’s most desirable cities to live in, and property prices to increase by almost 140% since 2008.

However, the last 12 months have seen a stark turnaround in Brazil’s economic fortunes. Chinese demand for Brazilian commodities has fallen, while high inflation and a surprising drop in Brazilian productivity has led to a sudden decline in Brazil’s economic output. As a result, the once high and mighty Real is now slipping from its pedestal.

The Real value? Brazil's currency has dropped sharply against the dollar in recent months. Image by FernandoOliveira - flickr.com

The Brazilian Real was regarded as one of the most over-valued currencies in the world until recently, but has fallen sharply in the last few months, and is now hovering at just two Reals to the US dollar.

For foreign investors, all of this is great news. The decline of the Real equates to a spending power increase of 22% compared with one year ago. Meanwhile, Rio, with its fantastic year-round climate and the 2014 FIFA World Cup looming ahead on the horizon, has lost none of its desirability.

Even more encouraging for foreign investors, local real estate experts are predicting that property prices in the city will also decline over the next 12 months, with some claiming that the average cost of a home could drop by as much as 25% as the level of local demand begins to wane.